Bank of America profits falling 18% was largely in line with the market’s rather low expectations however, so shares in the bank were up over 2% in morning trade in the US.
Similarly, JP Morgan may have reported a 7% decline in its profits but this was significantly better than expected. And, while Wells Fargo shares were trading lower, albeit less than 1% and, its earnings were also roughly in line with analyst expectations.
The reason for this is that in all three cases the provisions were made for loans made in the energy space, in particular to oil and oil-related companies. And, as a result, given the commodities slump the provisions were expected.
In a note out on Tuesday, Twentyfour Asset Management CEO, Mark Holman, said the firm was expecting headline numbers from all three of those that have already reported and Citigroup, which reports on Friday, to be disappointing.
According to Holman, the reasons for these expectations, so far borne out, were the tough trading conditions within investment banking in the first two months of the year, elevated risk premiums curtailing deal flow, restructuring and (further) litigation expenses and increased provisioning in the energy, metals and mining sectors.
"While not in as much trouble as they once were, the banking sector is by no means out of the woods."
Of the three, Wells Fargo, reported declines across its three businesses, while JP Morgan and BoA reported growth in their consumer businesses, albeit not enough to offset the provisions within its trading divisions.